Sale of Vauxhall cancelled

In one of the most shocking about-turns in car industry history, GM has decided not to sell Opel/Vauxhall after all, pulling out of an all-but-finalised deal to offload its European arm to Magna and its Russian partner Sperbank.

The Magna deal has looked certain for months, with only financing details stopping it from going ahead - the German Government had even pledged €4.5bn (£4bn) of loans to secure jobs in the country after the sale, and Magna had negotiated a deal with UK workers' union Unite to curb job losses. But according to General Motors "the business environment in Europe has improved," so it has decided not to sell.

The announcement comes just as GM announces its first sales rise in the US for nearly two years. After securing massive funding from the American Government, and successfully restructuring using that money, the maker has confirmed it will seek similar finance from Europe as it looks to turn Opel/Vauxhall around.

In the statement confirming its intentions, GM CEO Fritz Henderson said GM's aim is to "secure the best long-term solution for our customers, employees, suppliers and dealers, which is reflected in the decision reached today."

But there are potential problems. When GM went into administration, Opel/Vauxhall was placed into a trust to essentially protect it from bankruptcy. It could be the case that the trust, not GM itself, has the power to decide whether GM can renege on the Magna deal - and of its five board members, two are from the German Government. So, Magna may yet buy Vauxhall.

Henderson's assertion that GM is "confident that the European Business can be successfully restructured," is being met with positivity by Unite this morning (4th November 2009), but there's no specific word on how GM plans to restructure. The deal struck between Unite and Magna limited job losses to 600 in the UK, and although that number could actually increase now, Unite leader Tony Woodley is confident that Vauxhall is better served in the hands of GM.

Mark Nichol